Current:Home > MarketsChina’s Dramatic Solar Shift Could Take Sting Out of Trump’s Panel Tariffs -ThriveEdge Finance
China’s Dramatic Solar Shift Could Take Sting Out of Trump’s Panel Tariffs
View
Date:2025-04-15 15:55:04
The American solar market may be about to get boost from an unexpected source: Energy analysts say the Chinese government’s decision to dramatically cut its solar power subsidies will create a glut of solar panels and send their prices tumbling worldwide.
It comes at a crucial time for American solar installers. Falling prices could take the sting out of President Trump’s solar panel tariffs, which have raised costs in the United States and led to billions of dollars in cancelled and frozen U.S. investments.
“It’s changing the tone from negative to positive for the U.S.,” said Xiaoting Wang, an analyst with Bloomberg New Energy Finance (BNEF).
Last week, the Chinese government announced it would halt approvals of new subsidized utility-scale solar plants, limit the amount of smaller-scale distributed generation installed and shrink the subsidies it provides to solar generators. All told, these policies are expected to cut the amount of solar capacity installed this year in China by 30 to 40 percent, according to Wood Mackenzie and BNEF.
Because China leads the world in new solar installations, the steep drop in demand will ripple across the global market.
BNEF expects prices of some panels to fall 34 percent as result. That will bring down installation costs for new solar projects, particularly large, utility-scale systems, and spur new investment in other countries, though BNEF said that new investment is unlikely to make up for the drop in China.
Lower Prices Could Counteract the Tariffs
Morgan Lyons, a spokesman for the Solar Energy Industries Association, said it’s too soon to know what the effects on the U.S. market will be, but that it will likely lead to lower costs.
The drop could also counteract the impact of new tariffs the Trump administration imposed on imported solar panels. The tariffs, which started this year at 30 percent and will decline over the next three years, gave a boost to domestic manufacturers of solar panels, who faced competition from cheap imports from China and other countries. One of those manufacturers, First Solar Inc., saw its stock price fall sharply after China’s announcement because it’s now expected to face lower-cost competition once again.
But the tariffs have the opposite effect on the solar installation sector, which employs far more people than manufacturing.
U.S. solar developers have canceled or frozen more than $2.5 billion in investments, Reuters reported Thursday. A report by GTM Research said the tariffs would cut solar installations by 11 percent over five years, or about 7.6 gigawatts less new capacity than previously forecast.
Why Did China Cut Its Solar Incentives?
While the announcement by China sent a shock through the solar industry, it wasn’t entirely surprising, according to BNEF.
The costs of the subsidies the government provides to the renewable energy industry have been growing at an unsustainable rate, analysts said. The nation’s solar producers have also had to curtail their actual output because they’ve grown faster than the grid’s capacity. The cut in subsidies will address both of those problems by slowing growth, Frank Yu, an analyst with Wood Mackenzie in Beijing, said in a research note.
Wind energy has faced similar issues in China, and officials have discussed cutting subsidies for that industry as well.
The new policies may also spur innovation and competition, making the industry more efficient. The Chinese government said it would require utility-scale solar projects to sell their electricity through competitive auctions, a move that will likely lead to lower prices. All of this together, Yu said, will speed the adoption of solar power outside China, particularly in Southeast Asia, which may attract more investment from China and benefit from lower prices.
This week, Chinese solar firms sent a letter to their government urging it to delay the new policies, saying they faced huge debts and needed a few more years of subsidies to be more competitive.
Turmoil First, then Grid Parity
If the policies remain as announced, the global market will face a period of turmoil first as the effects spread throughout the global supply chain. Eventually, though, Yu said they’ll help solar compete with conventional power sources without the need of government support.
Already, some types of utility-scale solar projects are competitive with even the most efficient natural gas power plants.
In March, BNEF released a report saying that costs for solar, wind and batteries were falling fast enough that they’re putting pressure on fossil fuels globally. In particular, it said lower battery costs mean that wind and solar facilities can now store power relatively cheaply and release it when needed.
“Some existing coal and gas power stations, with sunk capital costs, will continue to have a role for many years,” the report said. “But the economic case for building new coal and gas capacity is crumbling, as batteries start to encroach on the flexibility and peaking revenues enjoyed by fossil fuel plants.”
veryGood! (6)
Related
- 'Most Whopper
- In Brazil, the World’s Largest Tropical Wetland Has Been Overwhelmed With Unprecedented Fires and Clouds of Propaganda
- Logan Paul and Nina Agdal Are Engaged: Inside Their Road to Romance
- The Best Ulta Sale of the Summer Is Finally Here: Save 50% On Living Proof, Lancôme, Stila, Redken & More
- Off the Grid: Sally breaks down USA TODAY's daily crossword puzzle, Triathlon
- In Pennsylvania, a New Administration Fuels Hopes for Tougher Rules on Energy, Environment
- U.S. Starbucks workers join in a weeklong strike over stores not allowing Pride décor
- Kim Kardashian Is Freaking Out After Spotting Mystery Shadow in Her Selfie
- Off the Grid: Sally breaks down USA TODAY's daily crossword puzzle, Triathlon
- Inside Clean Energy: Solid-State Batteries for EVs Make a Leap Toward Mass Production
Ranking
- Who's hosting 'Saturday Night Live' tonight? Musical guest, how to watch Dec. 14 episode
- Environmentalists Fear a Massive New Plastics Plant Near Pittsburgh Will Worsen Pollution and Stimulate Fracking
- Inside Clean Energy: Yes, There Are Benefits of Growing Broccoli Beneath Solar Panels
- Inside Clean Energy: This Virtual Power Plant Is Trying to Tackle a Housing Crisis and an Energy Crisis All at Once
- Toyota to invest $922 million to build a new paint facility at its Kentucky complex
- Teacher's Pet: Mary Kay Letourneau and the Forever Shocking Story of Her Student Affair
- Inside Clean Energy: E-bike Sales and Sharing are Booming. But Can They Help Take Cars off the Road?
- Inside Clean Energy: What’s Hotter than Solar Panels? Solar Windows.
Recommendation
Jamie Foxx gets stitches after a glass is thrown at him during dinner in Beverly Hills
The FAA is investigating the latest close-call after Minneapolis runway incident
The Truth About Kyra Sedgwick and Kevin Bacon's Enduring 35-Year Marriage
Taking a breather: Fed holds interest rates steady in patient battle against inflation
EU countries double down on a halt to Syrian asylum claims but will not yet send people back
Andrea Bocelli Weighs in on Kim Kardashian and Kourtney Kardashian's Feud
Shein invited influencers on an all-expenses-paid trip. Here's why people are livid
Police investigating after woman's remains found in 3 suitcases in Delray Beach